New South Wales Supreme Court CITATION : ZURICH AUSTRALIA INSURANCE v. JOHNSTONE [1999] NSWSC 64 CURRENT JURISDICTION : Common Law FILE NUMBER(S) : 10022/99 HEARING DATE(S) : 15 February 1999 JUDGMENT DATE : 15 February 1999 PARTIES : Zurich Australia Insurance Pty. Limited v. Kathryn JOHNSTONE JUDGMENT OF : Greg James J at 1 LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 3841/98 LOWER COURT JUDICIAL OFFICER : P. O'Shane COUNSEL : Plaintiff: C. Hodgson Defendant: D. Banwell (Solicitor) SOLICITORS : Plaintiff: Stapleton Gruzman Defendant: Neville R. Banwell & Associates CATCHWORDS : Stated case - error of law - errors of principle in exercising discretion to allow amendment - no question of principle Local Court (Civil Claims) Act 1970 ACTS CITED : Insurance Contracts Act Suitors Fund Act DECISION : The stated case is upheld ZURICH -5- IN THE SUPREME COURT OF NEW SOUTH WALES NAME OF DIVISION No. 10022 of 1999 GREG JAMES, J. MONDAY 15 FEBRUARY 1999 ZURICH AUSTRALIA INSURANCE PTY. LIMITED v. KATHRYN JOHNSTONE JUDGMENT HIS HONOUR: 1 These proceedings were brought to this court by way of stated case from the decision of a magistrate sitting in the Local Court under the Local Court (Civil Claims) Act 1970. 2 The stated case contains in paragraph 1 a description of the issue that has brought the matter here, in particular that in proceedings against an insurer, the defendant in the lower court and the plaintiff in the proceedings before me, a claim has been made for damages arising from a refusal to indemnify the plaintiff in that court, the defendant in the proceedings before me, in respect of the loss of a motor vehicle which had allegedly been stolen and abandoned having been burned out. 3 In those proceedings, which have not yet or had not yet as at the date of the learned magistrate's determination, which is in question before me, been set down for hearing, the insurer sought to amend its defences. It was partially successful before the learned magistrate. That its success was only partial is what has brought us here. 4 There was sought as well as the amendment the magistrate granted, an amendment which would have permitted the raising of defences under the Insurance Contracts Act, which might effectively be described as defences relying on material non-disclosure and, in particular, a defence that the defendant had failed to disclose to the insurer that her de facto husband had been convicted of serious offences which might compendiously be described as relating to motor vehicles and also offences of dishonesty. 5 The learned magistrate, according to the stated case, determined that the insurer should not have leave to amend its defence by raising those defences, notwithstanding the application to amend did not apprently appear to present or to raise any real questions of prejudice, notwithstanding that the application does not appear to raise any question of inconvenience to the action by way of its timing, but on the basis that the learned magistrate considered there was no evidence which would establish that the defence "would" succeed at a hearing and, further, that what it was sought to raise was "irrelevant" to the issues between the plaintiff and the defendant. 6 It is contended that in the upshot the conceded discretion the learned magistrate had to allow or refuse an amendment miscarried on the basis that she erred in principle, in particular, by failing to consider that if the matters particularised and pleaded were made out, a question arose of the legal responsibility of the insurer to indemnify being affected by proper application of the provisions of the Insurance Contracts Act and, secondly, that she further erred in principle by requiring evidence to establish the defence before the application for amendment would be granted, rather than allowing the amendment to raise a defence which might then properly be determined on the evidence at the trial. 7 Interestingly, the defence as it was sought to be pleaded was defective. So much is conceded. But that was not the ground for disallowing the amendment. In particular, the pleading failed, expressly, to assert the plaintiff's knowledge of the relevant matters, but these would undoubtedly be put to her in cross-examination in her case when she is called to give evidence. The application for amendment, however, sufficiently put her and her legal advisers on notice of those matters and of the contention that they were relevant. Further, it was pleaded she had failed to disclose them. In that sense, the pleading implicitly but sufficiently raised her ability to disclose the matters which would have required her knowledge of them 8 It has not been suggested by the plaintiff's counsel that, as the pleading stands, it fails to give adequate notice, though it has been suggested that the criminal record of a person not a party to the proceedings and not a party to the substantial action is legally irrelevant to its outcome and that the pleading as it stands as such that the amendment should not be allowed and even though it was disallowed on a different basis, it should not go back to the magistrate. 9 Having analysed the issues in this fashion, I am of the view that the stated case must succeed. 10 In my view, her Worship erred in holding that she would not permit the amendment in the absence of evidence establishing the defence. I am of the view that her Worship erred in holding that the criminal record of the plaintiff's de facto husband had to be irrelevant. She has mistaken the purpose of amendment and the possible breadth of material non-disclosure. 11 There are circumstances - and I need not detail them in this judgment - in which that record might be highly relevant so as to support just such a defence as is raised or sought to be raised under the Insurance Contracts Act, further, it is not necessary to prove the defence before one be allowed to raise it. 12 The principles of modern procedure in relation to amendment are particularly referred to by the High Court in State of Queensland & Anor v. J.L. Holdings Pty. Limited (1996) 141 ALR 353 and particularly in the joint judgment of Dawson, Gaudron and McHugh, JJ. in the passages commencing at p.356, ln.38 and through to p.357, ln.40. 13 Kirby, J. in his separate judgment dealt with the modern case law on amendment in a passage commencing at p.365 and concluding at p.367. At p.367, ln.16 his Honour set out the modern approach in point form concluding at p.371. 14 The principles have since oft been repeated in practice decisions and texts. There is nothing in any of the principles therein referred to which would disclose any appropriate basis on which her Worship should have refused this application. 15 One is driven to the conclusion that there has been an error of law and thus the stated case should be upheld. 16 In regard to costs, correspondence between the legal representatives and other communications have been tendered. Suffice it to say that the plaintiff below, the defendant here, was sufficiently put on notice of a claim for costs, unless some basis on which a defence might properly be raised and pleaded was agreed. 17 The pleading is less than ideal. That is a matter which might well have gone to costs except for this correspondence. But in the light of this correspondence, it is perfectly plain that the plaintiff was not prepared to accept any form of amendment which might raise the defence and, in those circumstances, I make an order for costs against her. 18 Notwithstanding, however, and having regard to s.6(1) of the Suitors Fund Act 1951, there being a successful appeal to a Supreme Court on the question of law, I am prepared to grant a certificate under that section in respect of this appeal. Last Modified: DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.